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2.99% from Bank of Montreal & TD (Limited Time promotion)
January 14, 2012
7:08 am
Jenna
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I was SHOCKED to hear that Bank of Montreal dropped their 5-year fixed/closed rate to 2.99%! I was not as shocked to learn that TD matched the rate of 2.99%, but still surprised. This is BMO's lowest rate EVER offered in the history of the bank. It is not clear if other big banks will follow suit.

It is going to be interesting to see how low the small brokerages will go to win business. The Sutton Member mortgage, currently my favourite, shows a rate of 3.06% (fixed/closed) on their website. They do offer a "quick close" rate that is usually 1/4 of a percent less than their posted rate, so their rate is currently less than BMO with said quick close option.

Bloomberg article, below:

http://www.bloomberg.com/news/.....treal.html

January 14, 2012
8:01 am
Peter
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Some other interesting notes:

- BMO's 5-year fixed mortgage promo is apparently the lowest advertised rate for such a mortgage for any bank in Canada, ever
- Both RBC and TD matched the rate promo for their 4-year fixed mortgage, with their promos ending at the end of February
- BMO said they're unlikely to extend the 5-year fixed mortgage promo beyond two weeks

What does this mean for interest rates in general? Beyond the competitive aspect of these rates, does this signal that the banks expect interest rates to remain low for quite a while? What other factors would be at play here?

January 14, 2012
8:45 am
Jenna
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Peter, that's a good question! When we bought our current house 14 years ago, we thought that 6.25% was a great 5-year fixed/closed rate...and it was! Little would we know that rates would continue to drop for a decade and a half!

In regards to what it means for interest rates, I can only offer my prediction for the short term. I predict that many of the big banks will match BMO's rate for the short term. I believe that some will extend the offer longer to win customers. In respect to the small mortgage brokerages, I believe that some will match and a few will lower to 2.70%. For any that choose to go lower, there will have to be a "catch", such as bundling services together, ie: mortgage, car & home insurance, etc.

I believe this could go on for a few months. Where I live (near Toronto), the low interest rates are useless if there are no houses on the market to purchase. I have been in the market for a resale home since November 2010, and every house of interest has had multiple offers and bidding wars, driving prices up.

So, a very select few will get 2.99% (with low house inventory). I think that the big banks could keep this up for a year if they needed to. It would not be a very big hit to such large institutions. After all, this may be a new customer acquisition strategy. Seeing as many Canadians bundle their banking services: chequing account, line of credit, mortgage, etc, this looks like an excellent move.

January 14, 2012
9:05 am
Peter
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If this starts a tangent discussion, I'll start a separate thread: I'm surprised there aren't more publicly advertised incentives for people to bundle services:

  • Chequing
  • Savings
  • TFSA
  • RSP
  • Mutual funds and other investment services
  • Mortgage
  • Car insurance
  • House insurance
  • Credit card
  • Line of credit

The only thing I've seen like that is, to some extent, HSBC Advance and Manulife One. I wonder what the statistics are in terms of how many Canadians bundle services and if so, which services.

January 19, 2012
11:32 am
cmor
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With mortgage rates dropping, you are certain to see the similar term deposit rates on the other side of the ledger drop. Finances are simple for banks and other financial institutions --- you can not pay deposit rates higher than what you lend it out to consumers.

If these mortgage rates remain low, expect deposit rates to stay low.

January 21, 2012
7:51 am
guest
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I bought a house last spring with a variable 5-year mortgage from ResMor at ResMor Prime minus 0.8%. ResMor prime was 3.00% then (and it still is now), so I'm currently paying 3.00% - 0.8 = 2.2%. No complaints here. I personally think variable mortgage rates are the way to go for the short and medium term. There's no way the BoC can start raising interest rates anytime soon without causing damage to an already fragile economy. I really see no advantage at all to getting mortgage financing through one of the big banks unless you do an all-in deal like Peter talked about above (although everyone I know who is doing Manulife One hates it).

January 23, 2012
11:10 am
Bing
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Is this another attempt by Canadian Banks to get rid of foreclosures from their books? Recently more and more foreclosures are showing up on the market. Here is a list of foreclosures in Calgary: http://calgaryrealestate.ca/ml.....reclosures

January 29, 2012
9:06 am
kilarney
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can anyone say "housing bubble?" Isnt this a required response by the banks to keep the bubble expanding as we see personal debt rising faster than the USA and at the same time lots of better jobs vanishing. Banks dont really care about the rate just the spread between lending and savings rates. So predictably a house in the GTA sold the other day for 200 thousand over the initial asking price. A bidding war between over 20 people probably spurred on by "cheap" money to blame? I wonder when the balloon will go pop?

January 29, 2012
11:40 am
Jenna
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kilarney said:

can anyone say "housing bubble?" I wonder when the balloon will go pop?

My husband and I were just having this same discussion yesterday. The identical house we lost buying in November 2010 just sold for $200K more…just 14 months later! It sold in a matter of days in 2012 and got $45,000 above asking (from $800K)…whereas it sat for almost 2 months in late 2010 and got below asking

I hope the bubble bursts soon. We have been unsuccessfully looking for a home in the GTA since that time and want to move.

January 29, 2012
5:47 pm
Bob
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The bubble will burst when banks run out of money to lend. I think Canadian banks, because they escaped from the financial crisis, are acting as if they are invincible and smarter than everyone else right now, and are lending recklessly.

What they don't realize is they escaped not because of their smart abilities, but rather their smallness in relation to the global financial world.

Domestic businesses are their bread and butter. They are digging their own graves by creating a domestic bubble that will blow up in their faces.

January 30, 2012
7:47 pm
Doug
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Jenna,

HSBC Bank Canada has matched the BMO discounted 5-year fixed mortgage offer of 2.99% for premium customer segments (HSBC Premier and HSBC Advance qualified) and is offering 3.09% (10 basis points higher) for retail banking customers.

Cheers,
Doug

January 31, 2012
7:10 am
Jenna
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Hi Doug,

Nice to see you--it's been a while! Pretty competitive of HSBC, I think.

Jenna

January 31, 2012
7:42 pm
Doug
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hi Jenna,

Nice to "see" you again too! Glad to see you're still active here (kinda taking over for me lately, which I'm pleased to see). I did see your post on Hubert's rate drop and will be commenting soon.

Cheers,
Doug

March 26, 2013
11:18 am
Yatti420
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BMO is back to 3.09%..

http://www.thestar.com/busines.....offer.html

Side note got a letter from ING yesterday.. Looks like they are still offering 3 year 2.79 fixed.. Not bad for one of the best mortgage products in the country.

http://www.ingdirect.ca/ownyourhome

See ya,

March 26, 2013
11:26 am
Jenna
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I'm betting it will cause ripples. Funny enough, I just got a rate hold for 3.69% at ING Direct (10 years). My husband preferred the 5-year term, but it looks like ING already pulled it.

March 30, 2013
2:16 pm
Doug
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Yeah, the 10 year term is a good idea, but likely offers little flexibility if you need to move and are forced to sell your home and isn't likely a good idea for investment properties (in case you need to sell). Do you know if their 10 year term is "portable" (to another property)? That'd be its only "saving grace," and make it really attractive, I think. :)

Cheers,
Doug

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